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Over on Twitter, economist Ernie Tedeschi notes, “Russia’s economy has shrunk 5% in inflation-adjusted terms since 2013. America’s has grown 7.5%.” Yes, Putin’s authoritarian populism is proving to be, among other things, simply terrible economics.
Russia’s prospects for long-term, diversified, sustainable economic growth remain bleak. There is no efficiently functioning legal framework, and government continues to interfere in the private sector through myriad state-owned enterprises. Corruption pervades the economy and continues to erode trust in the government. … Progress with market-oriented reforms has been uneven and often reversed at the urging of those with an interest in maintaining the status quo. Increasing inflationary pressure poses a major risk to overall macroeconomic stability. Large state-owned institutions have increased their domination of the financial sector at the expense of private domestic and foreign banks. …
Corruption is pervasive. Small elites control the bulk of the nation’s assets, and state institutions have been corroded. The main purpose of frequent anti-corruption campaigns is to ensure elite loyalty and hamper political opponents. The rule of law is not maintained uniformly across the country, and the judiciary is vulnerable to political pressure and inconsistent in applying the law. Protection of private property rights is weak. … Regulations remain burdensome. Bureaucratic obstacles and inconsistent enforcement of regulations make entrepreneurial decision-making very uncertain. The outmoded labor code continues to limit employment growth. The government uses extensive subsidies and numerous state-owned companies to influence domestic prices. … State-owned enterprises significantly distort Russia’s economy. State-owned financial institutions have further solidified their position by taking market share from domestic private banks and increasing their control of lending.
The index puts Russia right between Lesotho and Algeria. But hey, Russia does have a low, flat (!) personal income tax rate of 13% and a top corporate tax rate of just 20%. It’s a pro-growth, supply-side paradise — although one with a life expectancy of just 70.47 years. That’s #153 on the global league tables, by the way, a sweet spot just below Bangladesh and above North Korea (h/t to journalist Daniel Gross).Published in